Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity breeds austerity and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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As Democrats pop the bubbly, and celebrate their “victory” in the payroll tax / pipeline / doctor reimbursement skirmish, let me tell you why they lost a far bigger battle.

They had the Tea/Republicans on their knees. America clearly could see the Tea/Republican position was indefensible, politically, morally and economically. It favored the rich (no increase on taxes for the 1%), slammed the middle and poor (increase FICA), and was anti-stimulus, anti-employment and anti- common sense (reduce doctors’ pay).

In essence, the Tea/Republicans had gathered all their troops in the bottom of a well and declared war. The Democrats had but to cover the well, and those crazy right-wing debaters nobody sees every night, would have been gone.

Instead, the Democrats helped pull them up and out by agreeing to just a two-month extension of reduced FICA, agreeing to no millionaire surtax and agreeing on a fast decision on the Keystone XL pipeline. This is a victory?

In two months, FICA, surtax and pipeline once again will be on the table. The Democrat’s Champagne won’t yet have gone flat, before the skirmish will begin anew. In fact, the skirmish never will end. Call this a victory?

If recent history is a judge, the Obama Democrats probably feel a victory is anything that isn’t an outright defeat, and this wasn’t an outright defeat – only a partial defeat. So what would have been a victory? Politically, a victory is anything that will help grow the economy in advance of the 2012 elections – anything that defeats the Tea/Republicans plan to create another recession or depression, and cause voter dissatisfaction with President Obama.

The lack of a wealth surtax actually actually was a Democrat victory, though they don’t understand why. Any tax, even a tax on the 1%, is anti-stimulus, so the Democrats backed into that one. And the pipeline is yet to be resolved, though my guess is it will be approved, which will be another “backed-in” economic victory for the Dems. If anything, the pipeline will be more a plus than a minus economically, if not ecologically.

And that brings us to the payroll tax. Let’s begin with the fact that FICA is unnecessary. Worse than unnecessary, FICA is downright harmful. Contrary to popular wisdom, FICA does not pay for Social Security and it does not pay for Medicare. Like all federal taxes, it doesn’t pay for anything. It is 100% anti-stimulus, every dollar of which comes directly out of private savings.

Remember the formula: Federal Deficits – Net Imports = Net Private Savings. There is very little in America that is worse for our economy, and especially worse for working people, than FICA. Yet, the Democrat “victory” is a two month extension of a tiny decrease in a terrible, regressive tax, that should have been eliminated years ago.

O.K., presumably, this two-month extension will lead to a 1-year extension – enough to help the economy prior to November, but gee whiz, is this the best the Democrats could get today? A two-month extension of a tiny decrease?

As long as the Tea/Republicans were on their butts, revealed as anti-growth, anti middle-class, anti-poor and pro wealth-gap, the Dems should have demanded some real concessions. For instance:

Begin to institute #1-#9 today, in the order shown. That would grow our economy and guarantee Democrats the White House and Congress. Oh, worried about spending causing inflation? Though for the past 40 years there has been http://rodgermmitchell.wordpress.com/2010/04/06/more-thoughts-on-inflation/ no relationship between federal deficit spending and inflation, if/when excessive inflation did begin, we would institute the first inflation-fighting program the Fed successfully uses: Raise interest rates.

Now that would be a victory – for the poor, for the middle, even for the rich, for the Democrats and for America.